Position Paper. Cable Europe position paper on the review of the Satellite and Cable Directive. Executive Summary

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1 7 April 2016 Position Paper Cable Europe position paper on the review of the Satellite and Cable Directive Executive Summary The 1993 Satellite and Cable Directive facilitates the clearing of copyright and related rights for satellite broadcasting and cable retransmission in order to improve the cross-border transmission and reception of broadcasting services. The principle of collective management system enshrined in the Directive is important for the cable retransmission licensing of TV and radio programs. Rights for TV programs sometimes are held by a broadcaster or production company and sometimes by a large number of different rights holders. The mandatory collective licensing system helps avoiding the fragmentation of the rights and black-outs in programs retransmission. However, the implementation of the collective management system raises a number of concerns which have been raised by Cable Europe in earlier position papers. The existing possibility for a direct licensing system all-rights-included can also have benefits when the broadcaster has acquired all the rights included in a program and is willing to license the cable operators accordingly. Such a possibility should remain when both parties are willing to enter into such an agreement. Collecting societies should not be allowed to stop this negotiation process. Cable Europe believes that the licensing regime that is currently applicable to cable retransmission should be extended to: retransmissions of broadcast programmes, formulated in a technology neutral manner, covering re-transmissions via IPTV or other technology and over every infrastructure (wireline or wireless); and ancillary services in close connection to the broadcast such as time shifting services, catch up TV, Restart & Net PVR in order to meet consumers demand by offering up-to-date functionalities. In any case we believe that these ancillary services to the broadcast should follow the licensing system used for the linear (re) transmission of the primary broadcast: mandatory collective licensing or allrights-included direct licensing. Finally, we consider that any extension of the existing Country of Origin principle, enshrined in the Directive, should be considered extremely carefully to avoid competition distortions. This paper is an updated version of Cable Europe s response (submitted in November 2015) to the EC public consultation on the review of the EU Satellite and Cable Directive. It reflects the on-going thinking of our members on the issues covered by the consultation.

2 Extension of the Country of origin principle An extension of the country of origin principle to transmission services over the internet should be considered extremely carefully. Such extension to international online players (but also to online offers by broadcasters) would lead to competition distortions, to the detriment of other means of TV transmission where rights have to be cleared on a national basis. Extending the country of origin principle would also stimulate forum shopping for Internet services, inherently delocalized. Some online service providers would therefore locate their servers in Member States where less stringent legislation applies. Mandatory Collective licensing and direct licensing systems Collective licensing has proved to be very beneficial for cable operators as it improved the availability of and access to content across Europe And yet, the distribution of certain valuable sport events or successful movies is often still problematic. For example, a cable operator can be required to black-out a certain sport event if the required license - for the Member State in which the cable operator is re-transmitting - has not been cleared by the foreign channel. Also, in some instances, collecting societies still request payments for channels for which they do not represent any right. We have seen cases in which collecting societies do not even know the foreign channel for which they claim remuneration. In the event rights are not concentrated with a broadcaster or production company the costs to clear cable retransmission rights with a manageable number of collecting societies are comparably lower than the transaction costs operators would face in a system of individual licensing. The existing possibility for a direct licensing system all-rights-included can also have benefits when the broadcaster has acquired all the rights included in a program and is willing to license the cable operators accordingly. Such possibility foreseen by Article 10 of the Directive should remain when both parties are willing to enter into such an agreement. Collecting societies should not be able to stop this negotiation process. Due to technological evolution, many broadcasts that are transmitted by cable are technically speaking no longer retransmissions of the signal, which complicates the question as to who exercises the relevant rights. More generally, cable operators often deal with a general lack of clarity as to whether rights are held by broadcasters or by other rights holders (and exercised through collective management organisations). This lack of transparency leads to the common practice of double remuneration 2

3 claims and complex negotiations with different parties making conflicting claims to certain rights. More transparency is needed regarding which rights are held by the different collecting societies. Direct injection Direct injection involves the transmission, by broadcasters, of programme-carrying signals via a "point to point" line to distributors who pass the signals on to their subscribers allowing them to view the programmes. Due to differing views across the Member States as to whether direct injection is (or not) retransmission within the meaning of the Directive, licensing practices vary at national level. Dutch and Norwegian case law consider that no cable retransmission occurs when programmecarrying signals are injected directly into cable networks as there is no retransmission of an initial transmission to the public. A Belgian decision makes a more confused analysis. As noted in the Study on the Application of Directive 2001/29/EC on Copyright and Related Rights in the Information Society (De Wolf & Partners, 2013), the decision of 4 February 2013 of the Antwerp Court of Appeal is not straightforward and is difficult to understand. The court of appeal first observed that the cable transmission to the public following a direct injection (of the programmes by the broadcaster into the cable network) should be seen as single act of broadcasting via the cable network and hence as one communication to the public. Yet later in the decision, the court qualifies the cable operator s intervention as a cable retransmission. In Germany it has been agreed that direct injection does not constitute cable retransmission in the technical sense, however it is treated as such in practice. The tariff for cable retransmission applies even in case of direct injection of the signal. In Spain, it has not been formally determined, but direct injection is also treated as cable retransmission. However, at this point in time there are no compelling arguments for full harmonization on this topic at EU level, given the huge differences between Member States. Full harmonization would have a very considerable economic impact, lead to regulatory uncertainty and further complicate the local licensing processes. 3

4 Ancillary services in close connection to the primary broadcast Collective rights management has been the right solution to ensure an effective licensing process. But as audiovisual services become increasingly diverse and consumers ask for additional functionalities, such as catch-up TV and out-of-home usage, the licensing process needs to be updated. Obtaining these rights is often a strenuous process. The introduction of new services such as time shifting often faces licensing difficulties in cases where the rights are fragmented and / or where it is unclear who holds the relevant rights. These licensing difficulties and transaction costs constitute a significant barrier to innovation in distribution technologies, and include: refusals by rights holders to grant the necessary rights, who insist on technical measures to authorize in-home rights only, restricting the number of in-home devices to access the content; abuses of dominant position by collective management organisations ( CMOs ) who tend to prevent international broadcasters from providing cable operators with all-rights included channels and request unreasonable and unjustified licence tariffs; burden and transaction costs caused by the fragmentation of rights across national boundaries, identification of appropriate rights owners and unreasonable requests for remuneration for each additional type of device or location. There are also big differences among Member States. In Germany, for example, catch-up TV services have not yet been introduced on a large scale because of licensing difficulties. Smart functionalities such as Net-PVR and Replay-TV, VoD and catch-up TV offers require the clearance of several rights, usually at least the making available and the reproduction rights. Spain faces the same difficulties with regards to smart functionalities. These rights do not fall under the system of mandatory collective licensing or the possibility of allrights-included agreements with the broadcasters under Article 10 of the Directive. Hence, the licensing process is lengthy and often problematic. In the Netherlands and the UK many broadcasters can already provide cable operators with these rights, with the exception of foreign public broadcasters due to lack of clarity as to who holds the relevant rights. Also in Norway, the availability of catch-up TV and VoD requires the clearance of additional rights (reproduction rights / the making available rights) than those required for the initial 4

5 broadcast. In addition, broadcasters cannot offer all-rights-included (including ancillary services) to cable operators because collecting societies argue that ancillary services should be cleared by the distributors (the so-called last-window-out principle). In Switzerland a remuneration obligation already exists through collecting societies. Many difficulties we are facing in other markets are circumvented, by creating a one-stop-shop for fragmented rights and / or rights for which the ownership is unclear. Depending on the type of retransmission and communication to the public a specific tariff applies for functionalities, such as storage and replay. For example, catch-up TV is covered by Joint Tariff (JT) 12. The latter governs all license fees that service providers have to pay for private copies initiated by their customers on storage space that is supplied by the provider, provided that it is ancillary to a preceding broadcast. The same tariff applies to physical storage on the personal set top box (STB) of the customer and to virtual copies on the server of the service provider. This system significantly simplifies the introduction and roll-out of innovative functionalities and enables future innovations in distribution technology. Europe will only be successful in developing new and innovative audiovisual services if the complexity of the rights clearance process is reduced, in particular, in what concerns the functionalities closely linked to broadcasting and which the consumer considers an essential element of his viewing experience. Cable operators have launched new services to meet such customer demand, such as services enabling cable subscribers to watch their content on computers, tablets and/or smart phones, and want to offer their customers access to digital services wherever they are in their home country or abroad in the EU. Cable Europe would therefore suggest clarifying the licensing regime for all these services that are ancillary to the linear (re)transmission. The licensing of those rights should follow the linear (re)transmission regime: collective management or individual all-rights-included licensing with the broadcasters. We also believe that the introduction of a remuneration system for these services would make sense in the context of collective management. An author, who has agreed to the primary transmission of his work, typically has no interest in preventing the retransmission of the same work via any retransmission platform. This system already applies in Switzerland as described above, where, depending on the type of retransmission and communication to the public, a specific tariff applies for functionalities such as storage and replay. The collective rights management organizations act as the interface between artists and users on behalf of both Swiss and foreign rights holders. The users are granted a license to use the work for a fixed tariff. This system allows the rights user to obtain all rights for a specific use trough a one-stop-shop, which significantly simplifies the 5

6 introduction and roll-out of innovative functionalities and enables future innovations in distribution technology. Extension of the cable retransmissions system Due to the convergence of distribution technologies and standards it seems appropriate to clarify in the directive that the term (cable) retransmission is applicable to any linear and ancillary distribution of content via any transmission technology (e.g. via, DTT, IPTV, mobile and open networks such as the Internet or WiFi). The licensing practice should not differentiate between technical transmission standards. Hence, Cable Europe advocates that the mandatory collective management should be extended to a retransmission right that is formulated in a technology-neutral way (cable, IPTV, DTT, mobile and the internet/wifi) and to cover ancillary services in close connection to the broadcast (e.g. catch up TV, NetPVR) in order to answer consumers demand by offering up-to-date functionalities. It could also be very efficient for the development of innovative products to include in the licensing procedure other elements even though not copyright-related such as trademark license, metadata like EPG-data, marketing material, etc. Furthermore, the obligation to clear rights through licensing should be replaced by a mere remuneration obligation. An author, who has agreed to the primary transmission of his work, typically has no interest in preventing the retransmission of the same work via any retransmission platform. Negotiation and Mediation The mechanisms of negotiation and mediation should not differentiate between online-tv offers and traditional TV offers. Competition distortions to the detriment of national and local operators must be prevented. Cable Europe would like to stress the fundamental importance of Article 12 of the directive. This provision should ensure that cable retransmission works in practice. Considering the strong position of broadcasting companies (in particular regarding their exclusive contents) Article 12 is more important than ever. 6

7 TV programs are not substitutable and hence operators need well established programs in their portfolio. Customers expect to receive all important channels that are transmitted also via satellite. This weakens the negotiation position. The European Commission has also refused to pursue at least a few cases, based on lack of sufficient powers, in which broadcasters had been trying to impose unfair contract conditions on retransmitting entities. Those problems of unfair contract terms (such as obligations to retransmit in a specific technology, package or to a minimum number of subscribers) are still a major problem for cable operators. We believe that Article 12 of the Directive could be strengthened in order to allow for swifter licensing processes. Indeed, given that this provision lays down an obligation to negotiate in good faith, it could also establish a right for the platform operator to start the broadcast of the program without having entered into a license agreement against a deposit as laid down in 11 section 2 of the German Copyright Administration Act. About Cable Europe Cable Europe is the trade association that connects leading broadband cable TV operators and their national trade associations throughout the European Union. The regulatory and public policy activities of Cable Europe aim to promote and defend the industry s policies and business interests at European and international level. The European cable industry provides high speed broadband internet, TV services, and telephony into the home of 64.5 million customers the European Union. This paper represents the views of the full members of Cable Europe, and not necessarily those of our associate members, partners or affiliates.